Scenario planning is a technique that was invented in the 1950s to give the US Military an edge over the competition. Because it was the closest thing to predicting the future, private corporations quickly adopted it. Peter Schwartz, the pioneer of corporate scenario planning, described it as:
Essentially, scenario planning gives companies a method to think about possible outcomes using the science of strategic planning. This way of looking into the future and asking “what if” makes a business better prepared for unexpected changes. Businesses are thus less likely to be blindsided and have a way to respond to a positive or negative situation quickly.
Let’s look at the ins and outs of the scenario planning process, so your company can plan for future uncertainties.
Scenario planning fuses data analysis and storytelling to anticipate the future
Scenario planning is accomplished by analyzing your company’s current knowledge and beliefs and exploring the effects of external perspectives. It’s an analytical exercise and a process you can use to guide your present and future decisions.
Having a maximum amount of data is necessary to use scenario planning effectively. But data alone will only take you so far. You must have imagination and creativity to craft plausible scenarios. Storytelling is how scenario planning comes to life. It allows you to demonstrate how a specific event will affect your company and draws a clear picture of your industry’s landscape.
Scenario planning helps you move into tomorrow with more confidence
From HR and IT to finance and marketing, good scenario planning can benefit every department of your company. It helps you challenge your conventional knowledge and stretches your thought process. Scenario planning opens your eyes to a larger landscape. It lets you see how your company is connected within your industry and what it depends on to succeed.
When you implement scenario planning, you can:
The scenario planning process in 6 steps
Now that you know more about scenario planning, it’s time to learn how to create scenarios. Sure, planning your company’s future can be daunting, but that’s why we put together a comprehensive guide that will help you every step of the way.
Ready to learn what the future holds? Let’s go!
1. Identify your company’s direction and determine its main issues
You want every stakeholder to be on the same page at the beginning of the scenario planning process. It’s therefore crucial that your company’s direction and goals are crystal clear to everyone at the table.
At this point, you can start brainstorming key issues that may disrupt your company’s direction and stop you from meeting your goals. Your key issues should be questions that consider three key elements:
For example, if your B2B software company plans to release new management technology in the coming year, you could ask:
Answering the questions that are most relevant to your business goals will help you find your main issue(s).
2. Recognize what could affect your direction and main issues
Next, think about what could potentially impact your main issues. Concentrate on internal company roadblocks. Then examine how your local environment and the industry’s landscape may affect your main issues.
Key factors include competition, customer demand, suppliers, logistics, and technology.
If we use suppliers as an example, questions could be:
3. Determine what external forces could impact your company
Once you’ve looked within your company and explored your local environment, you must focus on big-picture issues. And look at how global events could impact you.
A PEST analysis is the best way to target the right external forces that could impact your main issues.
P – political
E – economic
S – Social
T – Technological
This part is difficult because the possibilities are endless. But it’s also fun because it’s a creative exercise that will get a few laughs. Still, remember that nothing is too farfetched. Wars, pandemics, and social changes are all possible scenarios. It’s important to state that you don’t only have to focus on negative changes. You can also plan for positive shifts that open up new opportunities.
4. Decide which uncertainties are most urgent
This step is less creative but more analytical. You have to take all the driving forces you came up with as a team and decide which would impact your company the most.
Decide which driving forces, internal and external, are most and less likely to occur. Think about which ones would be most damaging to your company in the long and short term.
Finally, create a list of driving forces that you believe are priorities.
5. Build a narrative and draft your scenarios
Now comes the fun part. Start crafting scenarios that use your main issues and most pressing driving forces. The key here is to write plausible stories that help you visualize a specific problem and think of ways it could play out.
Dive deep into your stories. This is when you must go far into “what if” questions. You want your scenarios to be plausible, time-sensitive, and relevant to your business. Still, you have to think outside the box to create compelling scenarios.
You can look at past events to guess how a particular driving force may impact a specific player in your industry and eventually affect your company.
6. Explore early indicators
Once you have your scenarios (yes, you should have more than one), it’s time to analyze them. Think about what early signs of change toward a specific scenario may look like.
This is crucial because it’s the only way you will be able to anticipate a certain scenario playing out. Remember that scenarios are just that, scenarios. So, it may not play out exactly as you intended.
Still, if you recognize early shifts in your industry, you’ll be prepared for whatever comes your way. Bear in mind that silent changes lead to significant shifts in the market.
The pandemic and its aftermath are perfect examples of why companies, no matter their size, should invest in scenario planning.
It’s the best way to prepare for the uncertainties of the future. It forces you to look at your internal issues and shows you how factors that seem detached from your industry can shake the very core of your business.